Reduces Stress

• Most people who cosign a loan are kin or a close friend to the primary borrower. Sometimes, the cosigner does not realize that she is legally liable to repay the debt in case you default. Defaulting on the loan could strain the relationship between you and the cosigner, especially if you cannot pay back the loan. Banks go after the cosigner 75 percent of the time on a defaulted loan, according to the Federal Trade Commission. If there are any missed payments, both credit histories will be tarnished.
  
  

Privacy

• Using a cosigner may mean giving up your account privacy. Joint account holders on a credit card, for example, can see every charge made to the account. This could mean revealing some embarrassing purchases or further straining the relationship with the cosigner. A cosigner might question purchases, such as a vacation, when the primary account holder could not qualify for a loan on his own.
  
  

Disadvantages of No Cosigner

• The main disadvantage to not having a cosigner is that the bank does not approve your loan application. This is a likely scenario when you have poor credit -- below a FICO score of 620 -- or insufficient income to cover the payments. Students and new borrowers frequently require a cosigner because they lack any type of credit history.
  
  

Tip

• Acquiring a line of credit or loan may not require a cosigner at all, even if you have no credit and a low income. One option for you to avoid a cosigner is to increase the collateral offered on the account. Also, you might have a nontraditional credit history that the creditor must consider, such as paid monthly utility bills and rent. You can bring canceled checks and receipts or report the accounts to an alternative credit agency for a monthly subscription fee.